August 17, 2009
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News: Charming Sells CC's to Alliance Data
Credit card companies have not been the only industry hit by consumer reduced spending; retailers are feeling the crunch as well. Most are searching for ways to reduce expenditures and increase cash flow. One alternative has been for those merchants with branded credit cards to sell secured prime debt or to move them off their books totally by selling the total program. Charming Shoppes Inc., parent company of Lane Bryant, Fashion Bug, and Catherine's women's and young girls' apparel and accessories chains, recently announced the company will be selling its branded credit card program to Alliance Data Systems Corp. The nearly $140 million sale is a strategic move by the retailer in an effort to reduce their debt and increase their focus on their core business.
The recent decision to sell its branded credit card accounts was only considered after previous attempts to reduce expenses by closing poor performing doors, reducing personnel costs, and selling off underperforming classifications. Provisions of the agreement call for Alliance Data to service over 4.5 million Charming Shoppes active branded card receivables for ten years. According to Jim Fogarty, President and Chief Executive of Charming Shoppes, the company will use $30 million of the sale proceeds to finance the credit card deal and the remaining $110 million to reduce company debt. Additionally, Charming Shoppes is expected to receive annual payments from Alliance Data on generated sales.
Alliance Data is based out of Dallas, Texas is a major source of merchant branded solutions, interactive and direct marketing services, and stand alone loyalty programs. They manage nearly 90 merchant branded credit card and marketing programs. The Charming Shoppes deal is expected to contribute to the growth of Alliance Data's business by approximately 20%. The deal also gives Charming Shoppes the responsibility of marketing the card. Alliance has also agreed to continued operations of the Charming Shoppes office located in Milford, Ohio that manages the card business.